Household saving is defined as the difference between a household’s disposable income (wages, income of the self-employed and net property income) and its consumption (expenditures on goods and services.)

Editor's Letter : Return of the old world order

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Barely more than a year ago, when the world was still awash with cheap money, it seemed as if globalization had hit a sweet spot. The financial world was abuzz with talk that the emerging markets had finally decoupled from the West and that, even if the US economy stumbled, the rest of the world would pick up the slack and avert a global downturn. Europe was enjoying strong, apparently sustainable growth. Latin America’s politicians were moving to the left as its economies were moving into the black. Trade between developing countries was growing at such a rate that it began to look self-sustaining. Even confirmed pessimists were beginning to believe that universal prosperity was possible after all. The rising tide surely was lifting all boats.

And then the credit crunch began. A few commentators—swiftly denounced as almost laughably alarmist—voiced their fears that the subprime fiasco might be the beginning of a meltdown of the global financial system. So far, they have still been proved wrong, but the upheaval in the financial markets and in the world’s banking system over the past year has been far more severe and far-reaching than most expected it would be.

The credit crunch also marked the beginning of a succession of seemingly unconnected events that threaten to throw off the delicate balance of the globalized economy. Rapidly rising energy prices, while causing only mild discomfort to the wealthier nations, are having a devastating effect on the world’s poorest. In tandem with the sharp rise in the cost of energy has been a painfully rapid increase in the cost of basic foods—again hitting the poorest the hardest. And with the financial shockwaves of the credit crunch spreading ever further, Europe has finally been shocked out of its complacency and admitted that its economy may indeed be contracting.

At the same time, Russia has been throwing its weight around in a way that has caused extreme—and justified—alarm among Western European nations and beyond. China, despite being in the glare of global media attention, shrugged off worldwide opprobrium as it mercilessly crushed a powerful protest movement in Tibet. And in Zimbabwe, incumbent president Robert Mugabe brazenly attacked his political opponents and their supporters in an attempt to snuff out their chances of unseating him in the presidential election.

The dramatic return of financial insecurity, the new wave of despotism, a possible resumption of the Cold War: The events of the past year have been disturbing enough to unsettle even the most doughty optimist. But there are still signs of hope—among the most promising, as we see in this month’s cover stories, being the huge surge in the effort to solve the energy crisis. But technology alone will not reverse the tide. It will take unwavering determination on the part of those committed to building a global economy based on fairness and openness that respects the cultures, humanity and environment of all the peoples on this planet. Corporations have a pivotal role to play in that—and it’s when times are bleak that their efforts will have the most effect.